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Written by Jackie Whiting
on August 31, 2021

The end of August means there is an entire month worth of news to catch up on. At kompany that means more partnership announcements! We concluded our “summer of partnerships” by announcing our latest collaboration, this time with Jersey-based Phundex. 

Heather-Anne Hubbell, CEO of Phundex, said of the partnership, "With the connection of the Phundex platform to kompany’s global register network, we are closing an important gap in the accessibility of company information. By directly accessing the registers of other countries and jurisdictions, we are streamlining the gathering of company information while reducing the operational risk associated with manual data entry." 

You can learn more about our work together and Phundex’s end-to-end digital pathway for investment lifecycle management by reading the full press release here

Now, onto the first story of our August 2021 RegTech Roundup. This month we’re jumping all over the map and covering stories across the globe, with a focus on how the coronavirus crisis has changed the conversation about money laundering and which institutional organisations have had their vulnerabilities exposed. 

Third of finance firms accelerate use of artificial intelligence to detect money laundering (ComputerWeekly)

As reported by Computer Weekly earlier this month, the disruption caused by coronavirus to the global economy and the subsequent increase in financial crime, has prompted many financial firms to accelerate adoption of new technologies in order to combat money laundering. 

According to a study from KPMG, software company SAS and the Association of Certified Anti-Money Laundering Specialists (ACAMS), “a third of finance firms are accelerating the use of AI and AML in their AML strategies…” and more than half of study respondents have already deployed this type of technology into their own AML compliance programs. 

The study cites the two main motivations for adopting this kind of technology as “the quality of investigations and regulatory filings” and to “reduce false positives and resulting operational costs.” As artificial intelligence is considered dynamic and adaptable by nature, it’s an ideal companion for financial institutions as they can be integrated into existing programs quickly and with minimal disruption, as echoed by David Stewart, director of financial crimes and compliance at SAS. 

And the stakes for financial institutions alone are only increasing. Banks that fall short in their AML strategies are having significant fines levied against them by regulators, with an estimated £2.6 billion in fines issued throughout 2020 alone. 

That’s nothing compared to what money laundering is costing the United Kingdom’s economy every year. “The UN estimates that up to $2tn is moved illegally each year. Criminals use big banks to hide money, which is often linked to organised crime, with funds being used to pay for assets to hide the money’s origin. In the UK, the National Crime Agency (NCA) estimates that money laundering costs the country’s economy £24bn each year.”

The key takeaway? Getting anti-money laundering strategies right isn’t just a matter of checking a box. Financial institutions and other obliged entities are beginning to acknowledge that replacing manual processes with technology driven ones will be the quickest and most effective way to fight money laundering while achieving the highest level of compliance possible. 

Did anyone say RegTech?

UAE anti-money laundering rule: Some businesses find compliance is no easy task (Gulf News)

Businesses throughout the United Arab Emirates’ free zones are beginning to receive penalty notices for their failure to register with updated anti-money laundering regulations as part of the UAE’s zero-tolerance policy on financial crime. Impacted businesses have 15 days to reply to the notice or risk facing significant fines.

Licensed businesses in the UAE, including real estate services, organisations offering consultancy, lawyers and accountants and those trading in precious stones, had until the end of March to register themselves on the country’s goAML portal. The goAML portal is an anti-money laundering digital platform designed with the purpose of preventing organised crime, including money laundering and terrorist financing. All financial entities and Designated Non-Financial Businesses or Progressions (DNFBPs) must register on the platform, which is expected to strengthen national cooperation against criminal activities. 

“Penalties for not meeting AML and CFT (counter terrorist financing) range from Dh50,000 to Dh5 million. The failure to comply with the regulations can also lead to the suspension of the license.” The maximum fine translates to just over $1.3 million USD and represents a strong step forward in the UAE’s fight against money-laundering and its predicate crimes. 

And joining the new national AML portal is not the only requirement imposed on obliged entities in the country. Recently, the UAE also issued updated requirements for licensed businesses to achieve complete transparency on their ownership structures. “This is part of the ‘UBO’ (Ultimate Beneficial Owner) requirements, and is defined as the individual who has – direct or indirect – ownership or control of a company. The Dubai Department of Economics has been imposing stiff penalties to those who failed to meet the deadline, even after pushing back the earlier date to give businesses more time to register.”

While the trend of stronger AML enforcement across the globe is certainly a positive one, many entities are struggling to catch up with evolving regulations. Should the trend to digitising and democratising relevant company information continue as expected, obliged entities will need to update their internal processes to remain compliant and stay competitive in their market. Integrating regulatory technology into their existing compliance programs can help organisations achieve a higher level of compliance while also streamlining back office operations so that teams can focus on the future instead of playing regulatory catchup. 

'Easy money': How international scam artists pulled off an epic theft of Covid benefits (NBC News)

The impacts of the coronavirus pandemic have unfortunately resulted in a staggering amount of taxpayer money being lost to financial criminals both at home and abroad. As reported by NBC News, the United States is just beginning to understand how much they’ve lost to scams throughout the crisis. 

“Russian mobsters, Chinese hackers and Nigerian scammers have used stolen identities to plunder tens of billions of dollars in Covid benefits, spiriting the money overseas in a massive transfer of wealth from U.S. taxpayers, officials and experts say.”

Unemployment programs have been one of the biggest targets of criminals. The federal government remains unsure of exactly how much money has been stolen but “but credible estimates range from $87 million to $400 billion — at least half of which went to foreign criminals, law enforcement officials say.” 

Naturally, people are raising their eyebrows at how such huge amounts of funding managed to be siphoned out of the system. Jeremy Sheridan, assistant director at the Office of Investigations at the Secret Service explains, “Due to the volume and pace at which these funds were made available and a lot of the requirements that were lifted in order to release them, criminals seized on that opportunity and were very, very successful — and continue to be successful,”

Those who have analysed the situation in detail describe a perfect storm of factors that made it especially easy for both domestic and foreign criminals to take advantage of an already vulnerable system of unemployment verification across the country. States also felt pressure to speed up the processing of covid-related benefits for businesses, and to bring the application process online. New benefits for contractors and gig workers even required no employer verification.

“In some cases, overseas organized crime groups flooded state unemployment systems with bogus online claims, overwhelming antiquated computer software benefits in blunt-force attacks that siphoned out millions of dollars. On several occasions, states have had to suspend benefit payments while they tried to figure out what was real and what was not.”

Many are wondering how to prevent such intense waves of fraud in the future. It would seem the first step is to invest in better digital infrastructure, starting with updating the state unemployment systems. According to the Labor Department's inspector general, “The Biden administration has allocated $2 billion to shore up state unemployment systems. That appears to be badly needed, because states have failed to take basic steps to improve identity verification..."

That's it for this month! But before you go...

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